Wednesday, May 19, 2010

Conflicted attitudes

For some time I have refused to spend money on newspapers, preferring to read my news on the internet. I have not changed my mind but today I bought the Financial Times and the Wall Street Journal Europe in order to understand fully the horrors of the EU regulation of hedge funds and the feebleness of the ConLib government while I sat on the tube.

Imagine my surprise when on page 2 of the WSJE I found an article by Simon Nixon, the European editor of the Heard on the Street column, entitled Five reasons to love the coalition. My surmise was correct, the misguided Mr Nixon is telling us to love the ConLib coalition. Hmm, I thought, the curse of Murdoch strikes again. After all, it is rather difficult to love this ramshackle coalition with its hotch-potch of policies from any independent perspective.

So what are those five reasons?

Reason number one is that "the coalition can claim an overwhelming mandate". Excuse me? I don't recall the coalition campaigning let alone being elected. What do I understand?

... the new government has a majority of 80 seats and a 60% share of the popular vote – almost unprecedented levels of support for a democraticgovernment.

This, Mr Nixon thinks, is so much better than a Conservative government with a small majority, whose instability the City had feared, would have been. What with the crisis in the eurozone and the EU's determination to destroy the hedge funds in Britain, the City has other things to worry about but it may be worth pointing out that the new government has no majority and not electoral support at all. In fact, unlike the last Labour government, it is unelected. The people who voted for the Conservative party did not vote for the electoral reform they are getting, which will put the Lib-Dims, who managed to get fewer votes and seats than the other two main parties, into pole position. What they did vote for was the Conservative promise to repatriate powers, now being reneged on. More fools they, you might say, but that's the way it is. Come to think of it, the Lib-Dims did not vote for the coalition either and are seriously unhappy about it.

Reason number two is that

the coalition's commitment to fiscal consolidation is clearly genuine. Chancellor George Osborne is to set out £6 billion ($9 billion) of spending cuts next week, a down payment on a much more comprehensive spending review later in the year.

Political promises, Mr Nixon, cost nothing and we have yet to see what those (not very extensive) cuts will consist of, in theory and practice. It may be a reason one day for loving this coalition but not yet.

Reason number three is "Mr. Osborne's decision to create a new Office for Budget Responsibility to audit government growth forecasts and fiscal projections", which is "a truly radical step that will boost the credibility of the U.K.'s fiscal framework, so badly undermined by Labour's optimistic forecasts and off-balance sheet chicanery". Do I not recall a promise to reduce drastically the number of quangos that have sucked power away from Parliament? Is the creation of a new quango as one of the first acts of the new parliament quite the way to go about it?

Fourth, the Tories were able to use the coalition deal to dump many poorly-conceived commitments while adopting many sensible Lib Dem policies, including on tax reform, political reform and civil liberties, that will help reinforce the coalition's legitimacy.

Will it really help the coalition's legitimacy to drop the promises for which far more people voted for in favour of the Lib-Dim ideas, which increased their vote by barely one per cent and lost them five seats? I am all in favour of tax reform and civil liberties. In fact, one of the reasons I did not support the Conservative Party was their weakness in those two areas but I hardly think reneging on promises is the right way to legitimate a ramshackle government or to restore faith in politicians.

Mr Nixon elaborates:

The Tory election campaign was so fixated on the voters' desire for "change" that it failed to recognize or respond to the electorate's anger at the way certain groups have been able to manipulate successive governments to cut special deals at the expense of ordinary working people. This was what linked anger over banker bonuses, special tax deals for private equity tycoons and non-doms, parliamentary expenses, the injustices of the benefit system and uncontrolled immigration. The Lib Dems understood this anger far better than the Conservatives and reflecting these aspects of their manifesto in the coalition agenda will be vital to reduce social tensions.

Indeed, the Tory election campaign was rubbish. Sadly, the Lib-Dim one was even worse. The idea that this or any other government can deal with the injustices of the benefit system and uncontrolled immigration (the latter being EU competence and the former often interfered with by the EU and the ECHR) without tackling the biggest of all problems, curiously not mentioned by Simon Nixon, is moonshine.

The fifth reason is that there is likely to be a weak opposition and that will help Tweedledum and Tweedledee to distance themselves from various unpalatable members of their own parties and save the country. I kid you not.

Luckily, the editorial page in the same newspaper is considerably more intelligent. In particular, I recommend this attack on the notion of greenie job creation, so dear to leaders of both parties, that relies entirely on huge state subsidies and/or a large raft of regulation.

Instead of U.N.-grade accounting, Mr. Cameron & Co. might instead look to Spain, where the government did indeed create thousands of "green jobs" with subsidies to the solar industry that totaled €1.1 billion ($1.4 billion) in 2008. But most of those jobs vanished just as quickly after crisis-hit Madrid slashed the handouts. Spanish taxpayers will never see a return on their"investment."

With all due respect to Chris Huhne, the Government's Energy and Climate Change Secretary, it's not hard to predict a similar fate for many of the British Government's "investments." If Mr. Cameron really wants to improve the government's energy efficiency, it might be easier to start by killing the cabinet department devoted to climate change altogether.

The trouble is that this government's understanding of the difference between investment and subsidy does not differ a jot from its predecessor's. And that is another reason for not loving the coalition.